SOL On A Subrogation Claim
Claims
counsel frequently carry heavy caseloads and thoroughly evaluate every aspect
of each to verify the insured gets what they deserve. If liability is
established, the claim is paid and the insurer is subrogated to the rights of
the insured to pursue the wrongdoer (technically known as “the Bad Guy”) whose
conduct gave rise to the claim.
Sometimes
overlooked in the claim determination phase (especially a lengthy one) is the
reality that the insurer is not only subrogated to the insured’s rights, but
also subject to any defenses the Bad Guy might have against the insured. Such
was the case of an insurer whose claims as subrogee ran into the statute of
limitations in Commonwealth Land Title Insurance Company v. KCI Technologies, Inc., et al., No. 1:17-cv-01070 (U. S. D. C. D.C., March 13, 2018).
A
survey done in 2006 did not identify
any encroachment on the land. Commonwealth issued the title insurance policy in
2007, without excepting any encroachment. In 2012, Insured hired a different
surveyor to survey the insured property, and that survey showed an encroachment
not shown on the earlier one. Yet another survey, done at Insured’s behest in
2013, not only showed the encroachment, but showed it as more extensive than did
the 2012 survey. A February 2014 survey done by the original (2006) surveyor at
Insured’s behest did not show the encroachment.
In
March 2014 (that’s right, a month after the last survey), the architectural and construction company hired by
Insured reported that the encroachment was actually 3 times larger than was
shown on the 2012 survey. As a result of additional costs necessitated by the
removal of the encroachment, Insured tendered its claims in late 2014 and Commonwealth
paid over $1,000,000 under the 2007 policy. In 2017, Commonwealth brought suit
against both surveyors, who raised the three-year statute of limitations.
Commonwealth admitted in its pleadings each
“alleged injury occurred when the surveying entity tendered survey reports that
failed to notice a 12 inch encroachment on the property.” The court determined
the statute of limitations for an action on the 2006 survey began to run against
the insured no later than 2012. Since the title insurance claim was paid under
the 2007 policy, the defective 2006 survey was the basis for liability. Even if
a separate cause of action had arisen for each survey, Commonwealth’s action
was barred against all of them.
Comment:
The Court determined the discovery rule is inapplicable to a case of
this type. Even if it were, the “latent defect” in the 2006 survey should have
been revealed by the 2012 survey, barring the claim brought in 2017. The
opinion doesn’t say when (or even, if) Insured notified Insurer of the later
surveys before tendering its claim. Obviously, a tender made after the statute
of limitations had run may well have been denied as untimely.